2017 Affordable Housing Advisory Council Annual Report
Report From The Chair
2017 was a milestone year for FHLBank San Francisco’s Affordable Housing Program (AHP), as the program reached $1 billion in grants awarded for the construction, rehabilitation, or purchase of housing affordable to very low-, low-, and moderate-income families and individuals. Since 1990, these dollars have created quality rental and homeownership opportunities for nearly 132,000 households in the Bank’s district and throughout the United States.
To celebrate reaching the $1 billion milestone, the Bank created a video that shines a spotlight on member and sponsor users of the AHP – people who go to work every day at a financial institution or nonprofit housing developer to produce those opportunities – along with some of the people who directly benefit from their efforts. Thanks, in part, to the Bank’s AHP, there are now thousands of people whose lives have been changed by having a safe, decent, and affordable place to call home: families, seniors, veterans, young people transitioning out of the foster care system, people with disabilities, individuals struggling with addiction or health issues, and homeless men, women, and children.
Quality affordable housing translates into dramatically improved living conditions for families and individuals. Providing access to affordable rental and homeownership opportunities in all corners of the Bank’s three-state district, and other areas served by Bank members, also makes entire neighborhoods safer, healthier, and more equitable. And when we pull back further to view the impact of the AHP through an even wider lens, we can see that where AHP projects are developed, local economies get a real boost.
In 2017, the Bank commissioned a study to look at the specific economic impacts of AHP grant making. Beyond Housing: Economic Impact of the Federal Home Loan Bank of San Francisco’s Affordable Housing Program 1990-2016 is an economic analysis conducted by Smart Cities Prevail in May 2017 that examined the direct, indirect, and induced economic effects of $884 million in AHP competitive grant funding awarded from 1990 to 2016. In analyzing the dollars deployed to support new construction and rehabilitation projects in 32 states plus the District of Columbia, Smart Cities Prevail found that, on average, the Bank’s grants are leveraged 25-fold: for every $1 million in AHP funding from the Bank, $25.3 million worth of housing is built or rehabilitated.
Viewed from this angle, it’s clear that the AHP is a significant economic engine for the regions served by the Bank’s member financial institutions. Using the IMPLAN input-output model, the Smart Cities Prevail analysis shows that nearly a billion dollars in AHP funding, combined with leveraged funding of $21.5 billion, contributed to the creation of:
- Nearly 120,000 new and rehabilitated housing units in 32 states and Washington, D.C.
- Over 500,000 full-time equivalent jobs
- Over $26.6 billion in labor income
- Over $3.2 billion in additional local and state taxes and fee revenue
- Over $76.5 billion in total economic activity
At a time when both quality jobs and financial resources for community and economic development are in very short supply, the ability of the Bank’s AHP to create new jobs, increase labor income, and boost local economies while improving living conditions for so many people is beyond impressive.
The Bank and the Affordable Housing Advisory Council (Advisory Council) are extremely proud of the AHP’s impact over the last 28 years. Looking forward, the challenges we face in addressing the scale and complexity of the nation’s ongoing affordable housing crisis are both familiar and new.
The market for Low Income Housing Tax Credits (LIHTC) began to suffer in anticipation of the reduction in corporate tax rates that became effective in January 2018. With tax credit equity pricing decreased significantly, in 2017 a handful of the Bank’s AHP-funded projects without investor commitments faced significant delays after being forced to seek additional sources of funding or make design changes to reduce costs. Others faced an unexpected need to contribute equity or deferred developer fees to make projects feasible. We expect that LIHTC projects will continue to have large financing gaps and will look to the AHP to help make up the shortfalls.
Particularly in California and other high-cost markets, inadequate supply of affordable housing units is exacerbated by increased construction and overall development costs. Factors contributing to rising costs across the board include:
- Land values
- Materials and labor, including labor shortages in many areas
- Local development fees and design requirements
- Lengthy permitting and development timelines
- Regulatory requirements
- Community opposition to affordable housing
While investment in lower-resourced neighborhoods is as critical as ever, the growing body of evidence that healthy, safe, more integrated, and economically stable neighborhoods with good schools improve outcomes and economic mobility for lower-income families and children is inspiring a new national conversation about how to reshape policies that direct development in opportunity-rich neighborhoods.
Helping to move that conversation forward, California’s Tax Credit Allocation Committee (TCAC) is signaling a commitment to fair housing principles with a set of policy changes that incentivize development of affordable housing options for families in higher opportunity communities. TCAC’s use of new neighborhood-level “Opportunity Maps” to inform resource allocation is one way to try to remediate long-standing opportunity imbalances by expanding access to better schools and higher paying jobs for low-income residents and communities.
There is also good news for affordable housing in California with the passage of Senate Bill 2, the Homes and Job Act that Governor Jerry Brown signed into law in September 2017. This long-sought piece of legislation creates a permanent and reliable source of funding for affordable housing by imposing a $75 fee on the recording of certain types of real estate documents. Proponents estimated that the fees collected will generate a revenue stream of $250 million each year and create 57,000 jobs over the next five years.
Senate Bill 2 is part of a comprehensive package that approaches California’s housing crisis from multiple angles. Governor Brown also signed Senate Bill 3, which will put a $4 billion bond on the November 2018 ballot, with $3 billion to subsidize the construction of low-income housing and the remaining $1 billion for home loans for veterans, and Senate Bill 35, which will ease local regulations for home building in an effort to spur construction, adding to overall supply. Taken together, the three bills represent a remarkable victory for affordable housing advocates at the state and local level.
In Arizona, affordable housing advocates have been making progress on bringing the State Housing Trust Fund back to its pre-financial crisis strength. In 2017, the Arizona Housing Alliance and the Arizona Coalition to End Homelessness joined forces to form the Arizona Housing Coalition, which is collaborating with LISC and other organizations on an intense campaign to fully restore the State Housing Trust Fund. In Nevada, where the overall number of affordable housing units is only 15 for every 100 households, compared to the national average of 35, the state legislature’s interim affordable housing committee is tasked with preparing up to five bill draft requests by June 2018 to submit for the 2019 session of the legislature.
Successes like these at the state and local level are important, and we must allow them to give us hope for similar progress at the national level at some point in the future, despite the chaotic political landscape. As the Joint Center for Housing Studies of Harvard University put it in its most recent State of the Nation’s Housing report:
"Given the pivotal role of housing in determining the well-being and financial security of every individual and family, attending to the nation’s critical housing challenges should have primacy in the debates over public spending, tax policy, and regulatory regimes. National housing policy must also recognize the diversity of conditions existing both within and across markets."
As priorities are defined, policies crafted, and resources mobilized to develop and implement solutions to the full spectrum of affordable housing needs in our communities, both public and private sector initiative and resources will continue to be in great demand.
The Bank, as a private entity with a public purpose, plays a vital role in affordable housing and economic development, offering programs that have proven effective over time and continue to evolve to meet emerging needs. The Advisory Council is pleased to present this annual report, which describes the Bank’s Community Program results and related activities in 2017.
Competitive Affordable Housing Program (AHP)
In 2017, the Bank awarded $73.6 million in grants through 20 Bank members to 89 projects that will construct or rehabilitate 6,280 units of desperately needed housing, creating affordable rental and owner-occupied options for individuals and families in 7 states – Alabama, Arizona, California, Florida, Nevada, Texas, and Wisconsin.
2017 Competitive Affordable Housing Program Results
|(Dollars in millions, except subsidy per unit)||Rental||Ownership||Total||1990-2017|
|Number of Applications||162||7||169||6,195|
|Number of Applications||88||1||89||2,302|
|Number of Units||6,275||5||6,280||125,042|
|Average Subsidy per Unit||$11,711||$32,500||$11,727||$7,520|
These results reflect adjustments, cancellations, and modifications to projects as of December 31, 2017.
In an uncertain financing environment, the AHP continues to be a reliable source of value-adding gap funding for projects that are successful in serving families and individuals facing specific housing challenges. The Bank’s 2017 AHP grants, ranging in size from $110,000 to $2 million, will support a diverse array of projects that target the needs of specific populations. For example:
- 49% of approved projects reserve at least 20% of their units for homeless individuals or households, including homeless veterans.
- 63% of approved projects reserve at least 20% of their units for special needs households, including seniors, physically/mentally disabled people, and people in recovery from substance abuse.
- 15% of approved projects have at least 20% of units located in rural areas.
A notable trend among the 2017 awarded projects is the adaptive reuse of existing structures to produce quality affordable housing. Projects like these demonstrate the value of creative thinking, as the purpose of a building is reimagined to create new housing solutions that maximize the value of under- or unused structures, making the most of existing resources.
- In San Luis Obispo, CA, an orphanage built in 1931 will be renovated to create 34 new apartments within the original brick structure, preserving its unique character, and another 13 units will be available in three newly constructed buildings that will provide supportive housing adjacent to the old orphanage.
- In Los Angeles, CA, two separate projects will adaptively reuse an existing motel to create 171 units of permanent supportive housing. The development is part of the Los Angeles County Department of Health Services’ Housing for Health program, which serves formerly homeless individuals who are frequent users of county facilities and services.
- Also in Los Angeles, the historic Angelus Funeral Home building will be preserved and renovated to produce affordable housing for low-income families.
- In Tucson, AZ, a historic building that had a long life as a college will be completely renovated, including the installation of an elevator inside a two-story structure that will provide quality affordable housing for low-income seniors.
- In Turlock, CA, a large unused warehouse will provide a foundation for creating emergency shelter and short- and long-term housing for homeless households.
- In Milwaukee, WI, a former hospital will be repurposed to create five floors of permanent supportive housing for low-income families and individuals.
Also noteworthy in 2017 are four innovative “sister” projects. These developments pair affordable housing projects targeted to distinct populations, oftentimes with one campus serving seniors and a second, related campus offering housing to families. These paired projects offer benefits beyond shared development costs and resources when they create opportunities to establish communities that can support one another. One of the 2017 “sister” projects will provide housing for both low-income seniors and the consistently underserved TAY (transition-age youth) population—it’s a kind of “matchmaking” for two distinct populations that has great potential to be mutually beneficial.